Whose MP3s Are They, Anyway?

If you have a CD or book you don't want anymore, you can sell it. The law says that's perfectly legal. But what about an MP3 or an e-book? Can you legally resell your digital goods?

This was the question before a judge in the case of Capitol Records v. ReDigi Inc.

Launched in 2011, ReDigi is basically a digital version of a used-record store. You can sell the company your old MP3s, and you can buy "used" MP3s that other people have sold.

ReDigi says its technology ensures that the person selling a used MP3 can only sell it once and can't keep listening it after it's been sold.

But, not surprisingly, record labels don't like the idea of people buying and selling used MP3s. A month after ReDigi launched, it got a cease and desist letter from the Recording Industry Association of America that said "there can be no doubt that ReDigi's conduct constitutes willful copyright infringement."

Last year, Capitol Records sued ReDigi. Their complaint alleged that ReDigi "makes and assists its users in making systematic, repeated and unauthorized reproductions and distributions of Plaintiffs copyrighted sound recordings."

The case revolved around a legal concept known as the first sale doctrine, which basically says that once you buy a copyrighted work like an album it's yours to do with as you wish.

The founder and CEO of ReDigi, John Ossemacher, says if this law applies to physical albums, it should also apply to digital albums.

"We see it very, very clearly that a copyright good is a copyright good and buyers of those copyright goods are entitled to certain protections under the law, " says Ossenmacher. "Those apply to digital just as much as they apply to any format."

The transcripts of the court case show just how complicated this issue can get. It veers from discussions of law and legal precedent to these pretty existential questions.

Do you really own something if it's just a bunch of ones and zeroes on your computer? If you take a digital song and you move someplace else, did you actually move it or did you just make a copy and destroy the original?

And, like so many discussions that touch on the nature of existence, the discussion in the courtroom led to Star Trek:

THE COURT: I kept thinking about this, but — I'm not a Trekkie, but I kept thinking it's the difference from Captain Kirk going from the Enterprise to the planet through that transporter thing, where he's not duplicated, to the cloning where there's a good and a bad Captain Kirk where they're both running around. I think one is a copy and the other is — the other was transported and it's only one Captain Kirk.

MR. MANDEL: Right. And, you know, that's part of the problem we have at a basic level because it's not Star Trek here, and I don't think they're really saying --

THE COURT: Wouldn't it be cool if it were?

Also, Willy Wonka:

MR. ADELMAN: I mean, one of the examples I was thinking of was Willy Wonka. Remember when they put Tommy on the stage. They beamed him, and you saw the particles go across the top and, boom, there he was, miniaturized, but still him in that TV. What's so hard to believe?

Despite all the references to the future and new technology, it was a word from the 1970s that was really at the heart of this case: phonorecord.

First sale doctrine states that "the owner of a particular copy or phonorecord lawfully made" is entitled "to sell or otherwise dispose of the possession of that copy or phonorecord."

The lawyers for Capitol argued that ReDigi couldn't be protected by first sale because the process of selling digital music through the company's platform created a copy of the music file, a "new phonorecord."

In the end, the judge sided with Capitol. He wrote:

...the fact that a file has moved from one material object — the user's computer — to another — the ReDigi server — means that a reproduction has occurred. Similarly, when a ReDigi user downloads a new purchase from the ReDigi website to her computer, yet another reproduction is created. It is beside the point that the original phonorecord no longer exists. It matters only that a new phonorecord has been created.

So does that mean you can't sell your MP3s? No. It just means that you can't sell them on ReDigi.

The judge said that the first sale doctrine does apply to digital works, but it only protects the sale of that " 'particular' phonorecord, be it a computer hard disk, iPod, or other memory device onto which the file was originally downloaded."

In other words, the judge said you can sell your old MP3s — as long as you sell them along with whatever device you used to download the MP3s in the first place.

Capitol Records declined to comment for this story.

Jason Schultz, a law professor at the University of California, Berkeley, who used to work for the Electronic Frontier Foundation, said that the ruling may kill off the used-book and record stores of the digital age. "There is a lot of value both economic and social that we get from having secondary markets," he told me.

The people at ReDigi say they'll appeal the ruling. They also say they've created new technology, "ReDigi 2.0," to comply with the ruling. With the new technology, ReDigi customers who buy new MP3's will have the MP3s sent directly to ReDigi's servers in the cloud.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

DAVID GREENE, HOST:

In many ways, the Internet and the digital revolution have made it easier to buy and sell used stuff - think Craigslist, eBay, Amazon. But there is one way that the move online has complicated the buying and selling of secondhand goods. Here's Caitlin Kenney from our Planet Money team.

JOSH MADELL: Talking Heads, Teenage Fan Club, there's a lot of good stuff here. Down to Hank Williams, you know, 8.99, cheaper than a download is, a lot of times.

KENNEY: Josh is the co-owner of a store called Other Music in New York City. His store is an example of what economists call a secondary market, a place where people buy and sell used goods. And Other Music illustrates why secondary markets are good. People can make money off stuff they don't want anymore, and they can use that money to buy new stuff, stuff they do want.

It works well, except for one thing: a problem that's kind of hard to see at first. To find it, you have to ask the customers here to dig into their bags.

Do you have, right now on you, any digital device for listening to music?

ARI MAISONAVE: Yes, I do. The iPod.

KENNEY: You have an iPod?

MAISONAVE: Yeah.

KENNEY: Can you take it out for me?

MAISONAVE: Sure. You're funny.

KENNEY: This is Ari Maisonave, 50 years old from downtown Brooklyn. I asked him to scroll through his iPod and show me something he hasn't listened to in a while.

MAISONAVE: Adel.

KENNEY: You just stuck your tongue out.

MAISONAVE: Yeah. It's just - you know, it's played so much, that I'm over it.

KENNEY: Now, here's the problem. Ari owns Adel, but he doesn't want to listen to Adel. If he purchased the album on CD or record or cassette, he could just resell Adel 10 feet over at the counter, get the money and buy some music he actually wants. But Adel in her current form, a collection of digital MP3 files, is pretty much worthless.

Josh, the owner of this store won't buy the album. You can't hawk these used MP3s on eBay, and it's not just Adel.

JOHN OSSENMACHER: There are hundreds of billions of dollars of pent-up digital wealth on people's computers.

KENNEY: John Ossenmacher wants to free this wealth. He's the CEO and founder of a company called ReDigi.

OSSENMACHER: ReDigi is the world's first marketplace where consumers can lawfully buy and sell used digital goods.

KENNEY: In other words, ReDigi is an online used record store for your MP3s that you don't want anymore. But it's turned out to be more complicated than buying and selling used CDs. Last year, they were sued by Capitol Records for copyright infringement. The case revolved around this one legal concept: the first sale doctrine. Bill Rosenblatt runs GiantSteps Media Technology Strategies. He says under the first sale doctrine, once you buy a copyrighted work, like an album...

BILL ROSENBLATT: It's yours to do with as you wish. The publisher no longer has any control or say in what you do. You can sell it to someone else. You can give it away, lend it, use it as a doorstop, use it as a Frisbee.

KENNEY: And the CEO of ReDigi, John Ossenmacher, says if that law applies to an Adel CD, it should also apply to an Adel digital album.

OSSENMACHER: We see it very, very clearly that a copyright good is a copyright good, and a buyer of those copyright goods are entitled to certain protections under the law, whether it first sale doctrine or other items. And those apply to digital just as much as they apply to any other format.

KENNEY: The transcripts of this court case show just how complicated this issue can get. It very quickly veers from discussions of law and legal precedent to these pretty existential questions. Do you really own something if it's just a bunch of ones and zeroes on your computer? If you take a digital song and you move it someplace else, did you actually move it, or did you just make a copy and destroy the original?

Like so many discussions that touch on the nature of existence, the TV show "Star Trek" was invoked. To help us out, here's NPR's legal correspondent Nina Totenberg, reading from the court transcript.

NINA TOTENBERG, BYLINE: Judge Sullivan: I kept thinking about this. I'm not a Trekkie, but I kept thinking: It's the difference between Capt. Kirk going from the Enterprise to the planet through that transporter thing, where he's not duplicated, to the cloning, where there's a good and a bad Capt. Kirk, where they're both running around.

KENNEY: In the end, the judge stuck to the very specific language of the law, and ruled against ReDigi. He said, yes, it's legal to sell your used MP3s, but only if you sell the physical object on which you originally downloaded them. Meaning, if you want to sell Adel, say goodbye to your iPod or your computer.

Jason Schultz is a professor of law at UC Berkley. He says this ruling has huge implications - not just for ReDigi, but for lots of companies who might be interested in this secondary market, other online retailers, even libraries who lend out eBooks.

JASON SCHULTZ: There's a lot of value - both economic and social - that we get from having secondary markets. This case potentially kills them all off for the digital world and allows the copyright owner to say, well, if you ever want to read this book or see this movie or listen to this song, you have to come back to me, the original company, and get it from me. You can't get it from anyone else.

KENNEY: The people at ReDigi say they will appeal the ruling. They also say they've created new technology to get around these legal issues. This fight is far from over. Caitlin Kenney, NPR News. Transcript provided by NPR, Copyright NPR.